Digital payments jump, but robust fraud management key to users' safety

India’s digital-payment landscape has demonstrated remarkable expansion over the past few years. The recent data released by the National Payments Corporation of India showed that monthly transactions on the Unified Payments Interface (UPI) exceeded ₹25 trillion for the first time in a month — in May — and hit an all-time high of 18.68 billion in volumes. This reflects a 33 per cent year-on-year jump in transaction volumes, while the value was up 23 per cent. There was also a significant increase in the value and volumes of Immediate Payment Service, Aadhaar-Enabled Payment System, and FASTag transactions.

 

Although a rapid and widespread adoption of digital-payment methods has brought more people into formal banking and has played an important role in supporting tax compliance and reducing the scope of the informal economy, the safety, security, and reliability of digital payments should remain a top priority for policymakers. Strong legal and technological safeguards will help increase trust and adoption. In this regard, the Reserve Bank of India (RBI) has done well to mandate enhanced security features, including two-factor authentication and facilities such as modifying transaction limits. For immediately reporting financial frauds and to prevent fraudsters from siphoning off funds, the Citizen Financial Cyber Fraud Reporting and Management System was introduced in 2021, which has so far saved around ₹4,386 crore based on 1.34 million complaints. Additionally, the RBI issued Master Directions on Digital Payment Security Controls in February 2021, requiring banks to implement standards on common minimum security for various payment channels, including internet banking, mobile banking, and card payments, and also launched an artificial intelligence (AI)-based tool, MuleHunter.AI, to identify and track mule accounts frequently used to facilitate fraudulent transactions. To further protect consumers, the RBI has proposed an exclusive internet domain for banks. The latest Annual Report also noted that in 2025-26, enhancing security and preventing fraud would be a key priority for the banking regulator.

 

As a recent report in this newspaper showed, commercial banks and all-India financial institutions reported 63,315 cases of digital-payment fraud involving ₹1 lakh or more under the category of “Card/Internet and Digital Payments” between 2014–15 and December 2024. Financial losses in these cases are reported to be about ₹733 crore. Given that the data is only for cases involving at least ₹1 lakh, the number of cases could be much higher. Nevertheless, it’s worth noting that both the government and the RBI are engaged in spreading awareness and monitoring the situation. Increased awareness among users will help curb payment fraud to a large extent. Nonetheless, banks and other entities involved in the payment business must continue to strengthen the system. In this context, fraud control should involve constant monitoring to strike a balance between risk management and user experience. Payment-service providers should also aim to develop new-age solutions in areas related to security, data privacy, and fraud-risk management. A safe payment system will help further the goal of financial inclusion and achieve higher, sustainable economic growth.